Peninsula Energy (ASX: PEN)
has received a buy recommendation with speculative risk and a price
target of $0.07 from Canada-based investment bank Dundee Capital, which
initiated coverage on the company.

Dundee said it saw
considerable share price appreciation potential as milestones are met
and the stock re‐rates as it approaches production and becomes better
known by investors.

The following is an extract from the report.

This
is where much opportunity lies as comparatively it has a market cap
half of its peers, but despite this, it has highest resource base,
highest peak production rate, longest mine life, and cheapest valuation
on an EV/lb basis.

Early Blackrock investment has allowed
earthworks to begin, and with a very experienced operations and
development team in place, a Draft Source Material License in hand, the
Final License is due in Q1/14 to allow full scale construction, pending
financing. Dundee visited site over two days in January 2014.

Near term production potential

Lance Project in Wyoming hosts at least five roll front deposits with ~53.7Mlbs U3O8 at ~0.05% with vast upside potential.

Permitting
of a 3Mlb per annum ISR plant is nearly complete with the NRC Source
Material License due by March end. Production due in Q4/14 could last
for 20 years at just the Ross, Kendrick, Barber deposits.

Karoo
is located within Karoo sediments in South Africa. It contains ~50Mlbs
at ~0.1% U3O8, with further 49Mlbs of historical resources and numerous
other showings.

A PFS is underway as a positive PEA suggests 3‐4Mlbs of production potential by 2017.Cheapest valuation of its peers

PEN
trades at an EV/lb of US$0.71, in line with developer peers at US$0.70.
But excluding African assets, PEN still trades at US$1.37, well below
its US ISR peer group who include Uranium Energy (UEC‐US) at US$1.80/lb;
Uranerz Energy (URZ‐T) at US$6.41/lb; and Ur Energy (URE‐T) at
US$4.60/lb.

Typical risks

Besides usual
pre‐production and U3O8 risks, financing must be secured to meet its
aggressive schedule. Initial Capex is US$68 million. PEN had A$11.7
million at YE13 and drew ~$9.5 million of its $22 million Blackrock debt
facility.

We surmise a 2015 start‐up is likely. Final license is expected but not yet issued.

Valuation

We
model PEN using a 1.0x NAV multiple on our 10% DCF. Lance is modelled
as per guidance, except we have delayed production by one quarter.

We
suggest a 2 year production ramp up to 1.2Mlbs, and subsequent
expansion to 2.3Mlbs by F2021 with the addition of Kendrick production.